Community Development Block Grant eligibility and rules turn on two things: who the recipient is, and whether each funded activity meets one of three national objectives set by the Department of Housing and Urban Development. Larger cities and urban counties get money directly from HUD by formula, states pass funding down to smaller jurisdictions through competitive processes, and Indian Tribes apply through a separate national competition. Every dollar spent must fit an eligible activity category, satisfy a national objective, and stay within statutory caps on public services and administrative costs, while the grantee as a whole must direct at least 70 percent of its spending to low- and moderate-income residents.1eCFR. 24 CFR 570.200 – General Policies
Who Qualifies as a CDBG Recipient
Federal law sorts recipients into tracks by population. Entitlement communities receive annual formula grants directly from HUD and include metropolitan cities of at least 50,000 residents and urban counties of 200,000 or more, excluding residents of cities that already qualify as entitlement communities on their own.2HUD Exchange. CDBG Entitlement Program Eligibility Requirements These jurisdictions don’t compete. Their allocations are calculated using a formula that weighs factors including poverty rates and housing overcrowding.
Smaller cities and towns are non-entitlement areas. They cannot apply to HUD directly. Instead, each state receives a share of the national appropriation and runs its own competitive award process. Individual awards to non-entitlement jurisdictions typically range from $500,000 to $1,000,000, though the ceiling varies by state and shifts with annual appropriations.
Indian Tribes are a separate eligible category under Section 106 of the Housing and Community Development Act of 1974. HUD reserves one percent of the total CDBG appropriation for tribal grants, awarded competitively under selection criteria specific to that set-aside.3GovInfo. Housing and Community Development Act of 1974
The Three National Objectives
Every activity funded with CDBG dollars must meet at least one of three national objectives. A project can be worthwhile and still ineligible if it does not clearly fit one of them.4eCFR. 24 CFR 570.208 – Criteria for National Objectives
The first, and the one most projects rely on, is benefit to low- and moderate-income persons. For area-wide activities such as street improvements or park construction, at least 51 percent of the residents in the service area must be low- or moderate-income. For job creation, at least 51 percent of the jobs created must go to low- or moderate-income workers. Housing rehabilitation projects must serve households within income limits.
The second is prevention or elimination of slums or blight. An activity qualifies if it addresses conditions inside a formally designated slum or blighted area, or if a specific building or lot meets the definition of blight under state or local law.
The third is urgent need, reserved for emergencies posing a serious and immediate threat to community health or welfare where the jurisdiction can show no other funding is available. It is rarely used.
Beyond qualifying individual projects, the grantee must ensure that in the aggregate, at least 70 percent of CDBG expenditures over a certified period of up to three years benefit low- and moderate-income people. Administrative and planning costs are excluded from that calculation.1eCFR. 24 CFR 570.200 – General Policies HUD watches this number closely in compliance reviews.
What CDBG Money Can Pay For
The eligible activity list is broad. Common uses include property acquisition, housing rehabilitation, water and sewer upgrades, street repairs, sidewalks and stormwater systems, community centers, senior centers, parks, demolition and clearance of unsafe or blighted structures, microenterprise assistance, commercial rehabilitation, job training, and public service programs addressing health, education, youth development, and employment.5HUD Exchange. Community Development Block Grant Program
Public service activities are subject to a spending cap, and any construction contract over $2,000 triggers Davis-Bacon prevailing wage requirements, which usually push project costs above what private-sector bids would suggest.6U.S. Department of Labor. Davis-Bacon and Related Acts
Spending Caps
Three statutory caps shape how the money can be allocated, and exceeding any of them puts the grant at risk.
Public services are capped at 15 percent of the annual allocation plus 15 percent of the prior year’s program income. Services delivered by Community-Based Development Organizations focused on job training and employment support are exempt, as is microenterprise assistance.7eCFR. 24 CFR Part 570 Subpart C – Eligible Activities
Planning and administration are capped at 20 percent of the grant plus program income received during the program year. HUD tracks this through both an annual obligation test and a cumulative expenditure test for each grant year’s funds.8HUD Exchange. Updated Instructions for Completing the CDBG Financial Summary Report (PR26)
The 70 percent low- and moderate-income benefit floor applies to total CDBG expenditures over the grantee’s certified period.1eCFR. 24 CFR 570.200 – General Policies
The Planning and Application Documents
The core planning document is the Consolidated Plan, a five-year strategy that includes a housing needs assessment, a market analysis, and the jurisdiction’s community development priorities. Federal regulations require submission at least once every five years.9eCFR. 24 CFR Part 91 – Consolidated Submissions for Community Planning and Development Programs Each year inside that window, the grantee files an Annual Action Plan laying out specific activities and budget allocations for the coming program year.
Every Action Plan must include Standard Form 424, the Application for Federal Assistance. Before submitting any federal grant application, the jurisdiction must also hold an active registration in SAM.gov, which assigns the Unique Entity Identifier required on all federal award documents. Registration takes up to 10 business days and must be renewed every 365 days.10SAM.gov. Entity Registration A lapsed SAM registration is one of the most common and most avoidable reasons disbursements stall.
Entitlement communities submit through the Integrated Disbursement and Information System, HUD’s online platform for managing grants, drawing down funds, and reporting.11HUD Exchange. Integrated Disbursement and Information System Non-entitlement jurisdictions apply through their state’s portal under state-specific priorities and scoring.
Environmental Review Comes Before Spending
No CDBG funds may be spent on physical construction or site work until the grantee completes an environmental review under 24 CFR Part 58. The level of review depends on the activity.
Some activities are categorically excluded with no environmental assessment required, including tenant-based rental assistance, supportive services, operating costs, economic development equipment purchases, homebuyer assistance for existing units, and affordable housing pre-development costs like legal and consulting fees.12eCFR. 24 CFR Part 58 – Environmental Review Procedures
Others are categorically excluded but still subject to other federal laws. That group includes rehabilitation of one-to-four-unit residential buildings that does not increase density beyond four units, rehabilitation of multifamily buildings where unit density does not shift by more than 20 percent and costs stay below 75 percent of replacement value, repair of public facilities without expanding capacity by more than 20 percent, and accessibility improvements.
Anything outside those categories requires a full Environmental Assessment, and if the assessment shows potentially significant impacts, a full Environmental Impact Statement may follow. Grantees that spend money before finishing environmental review risk having those costs declared ineligible, meaning repayment from non-federal funds.
Public Participation Is a Compliance Gate
Every grantee must adopt and follow a Citizen Participation Plan describing how residents will be informed about available funding, proposed activities, and program performance. HUD can reject a submission that does not show adequate community engagement.
Grantees must hold at least two public hearings per program year at different stages of the grant cycle, covering community development and housing needs, proposed activities, and past performance.13eCFR. 24 CFR 570.431 – Citizen Participation The grantee must publish a summary of proposed plans and make the full application available at public locations such as libraries and government offices for review and written comment. The final application must include a summary of comments received and the grantee’s responses.
Federal regulations also require reasonable steps to ensure participation by non-English-speaking residents, minorities, and people with disabilities. Where a significant number of residents with limited English proficiency are expected to participate, the jurisdiction should address language access in its Citizen Participation Plan.
Conflict of Interest Rules
CDBG conflict of interest standards go further than many local ethics codes. Any person who exercises decision-making authority over CDBG activities, including employees, consultants, officers, and elected or appointed officials of the grantee or any subrecipient, is prohibited from obtaining a financial interest or benefit from a CDBG-assisted activity. The prohibition extends to immediate family members and business associates.14eCFR. 24 CFR 570.611 – Conflict of Interest
The restriction runs for the duration of the person’s involvement and for one year after they leave the position. HUD may grant case-by-case exceptions, but only after the grantee submits a written request that includes full disclosure of the conflict, a legal opinion from the grantee’s attorney confirming no state or local law violation, and evidence that the exception serves the program’s purposes. HUD’s review considers whether competitive bidding occurred, whether the person has withdrawn from all decision-making on the activity, and whether denying the exception would cause undue hardship.
Reporting and Recordkeeping After the Award
The main annual report is the Consolidated Annual Performance and Evaluation Report, due to HUD within 90 days after the close of the jurisdiction’s program year.9eCFR. 24 CFR Part 91 – Consolidated Submissions for Community Planning and Development Programs It details accomplishments, expenditures, and alignment with national objectives. HUD uses the CDBG Financial Summary Report (PR26) inside the Integrated Disbursement and Information System to track the 70 percent low- and moderate-income benefit requirement, the 15 percent public services cap, and the 20 percent planning and administration cap.8HUD Exchange. Updated Instructions for Completing the CDBG Financial Summary Report (PR26)
Grantees must retain all records and supporting documentation for at least three years after the grant is formally closed out, or longer where other applicable laws require it.15eCFR. 24 CFR 570.490 – Recordkeeping Requirements Keeping records longer than the minimum is wise, since HUD audits and Office of Inspector General reviews sometimes look back further than three years.
Fair Housing Certification
Every grantee must certify that it will affirmatively further fair housing as a condition of receiving funds. The certification is not passive. Grantees are expected to analyze fair housing barriers within their jurisdiction, set goals for addressing them, and take meaningful action. Any action materially inconsistent with the fair housing obligation can put funding at risk.16eCFR. 24 CFR 5.152 – AFFH Certification and Administration The analysis should be reflected in the Consolidated Plan, and HUD has authority to challenge a certification if evidence suggests the jurisdiction is not meeting its obligations.
Borrowing Against Future Grants
Entitlement communities that need more capital than a single year’s grant can support may borrow against future allocations through the Section 108 Loan Guarantee Program. The maximum loan commitment is five times the jurisdiction’s most recent approved annual entitlement, minus any outstanding Section 108 balances.17HUD Exchange. About the Section 108 Loan Guarantee Program The tool is typically used for large economic development or major infrastructure projects. The tradeoff is real. Future CDBG grants serve as collateral, so a default would cut community funding for years.